# Regulatory gap

`kaal:entity:regulatory-gap`

**Status.** derived

This node is assembled mechanically from the 17 claims that carry the concept tag `regulatory-gap`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

17 claims across 11 works, 2009 to 2019.

**2009**

- [1428387-003](https://wulfkaal.github.io/claims/1428387-003) [failure/argued] *(failure mode)* -- Existing international proposals and guidelines on hedge fund valuation fail because they do not adequately distinguish between retail and qualified investors, and as of 2009 no legislature has issued an exhaustive set of rules addressing the factors that cause inaccurate valuation.
  > They also do not adequately distinguish between retail investors and qualified investors.11 So far, no legislature has issued an exhaustive set of rules to address the factors that lead to inaccurate valuation.
  Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387
- [1428387-017](https://wulfkaal.github.io/claims/1428387-017) [failure/argued] *(failure mode)* -- Although regulators and legislatures in many jurisdictions recognize that hedge fund issues affect retail investors, they have so far not addressed valuation and its interplay with retail investors.
  > So far, however, regulators and legislatures have not addressed the issue of valuation and its interplay with retail investors. The
  Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387

**2010**

- [1558614-017](https://wulfkaal.github.io/claims/1558614-017) [failure/argued] *(failure mode)* -- For different structural reasons in each country, corporate law in both Germany and the United States has little to say about the problem of excessive risk.
  > Thus, perhaps for differ- ent reasons, corporate law in both countries may have little to say about the problem of excessive risk.
  Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614

**2012**

- [2097160-028](https://wulfkaal.github.io/claims/2097160-028) [failure/argued] *(failure mode)* -- Where rules and regulatory guidance are absent, fiduciary duties are the only constraint on executives, and existing fiduciary duties could prove insufficient to limit opportunism and abuse when the payoff is substantial.
  > Without rules and regulatory guidance regarding the design and issuance of contingent convertible bonds, SIFI executives may only be curtailed by their fiduciary duties. Existing fiduciary duties could prove insufficient to limit opportunism and abuse if the payoff for executives is substantial.193
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
- [2150377-003](https://wulfkaal.github.io/claims/2150377-003) [mechanism/argued] *(failure mode)* -- The client counting safe harbor, which let an adviser count a pooled entity rather than each investor as a single client, allowed advisers to manage large amounts of securities indirectly for several hundreds of investors across multiple hedge funds while remaining outside registration and supervision.
  > This safe harbor allowed investment advisers to manage large amounts of securities indirectly for several hundreds of investors in several hedge funds.53
  Wulf A. Kaal, Hedge Fund Manager Registration Under the Dodd-Frank Act (2012). SSRN: https://ssrn.com/abstract=2150377

**2016**

- [2715083-024](https://wulfkaal.github.io/claims/2715083-024) [failure/asserted] *(failure mode)* -- The subadvisory route leaves a regulatory gap: none of the mutual fund manager's obligations, such as daily valuation, public and SEC reporting, or independent boards, reach the private fund adviser serving as subadviser.
  > none of the mutual fund manager's regulatory obligations (such as daily valuation, public/SEC reporting, independent boards, etc.) apply to the private fund subadviser.
  Kaal, Confluence of Mutual and Private Funds (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2715083
- [2740477-007](https://wulfkaal.github.io/claims/2740477-007) [failure/argued] *(failure mode)* -- Artificial intelligence cannot be held personally liable for damage it causes because national and international law do not currently recognize it as a subject of law, so compensation must be forced through existing provisions never designed for it.
  > However, national and international law do not (currently) recognize AI as a subject of law. Without legal personality, AI cannot be personally liable for damages.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-008](https://wulfkaal.github.io/claims/2740477-008) [failure/argued] *(failure mode)* -- Disruptive innovative technology frequently does not fit the legal categories created by recalcitrant regulatory structures, so the classification problem itself is a source of regulatory failure.
  > Disruptive innovative technology often does not fit into existing legal categories created by recalcitrant regulatory structures.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2811718-005](https://wulfkaal.github.io/claims/2811718-005) [failure/argued] *(failure mode)* -- Almost no guidance exists on the standards applicable to private fund investor due diligence, so despite the growing importance of due diligence in capital formation and in litigation the industry is left mostly to its own devices to ensure adequate standards.
  > Little to no guidance exists on applicable standards for IDD.18 Despite the increasing relevance of IDD in the capital formation and allocation process, and IDD litigation, the industry is mostly left to its own devices to ensure adequate due diligence standards apply.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-040](https://wulfkaal.github.io/claims/2811718-040) [failure/evidenced] *(failure mode)* -- Despite bringing enforcement actions over misrepresentations about due diligence, the SEC has not taken a rigid enforcement position on whether particular due diligence industry practices are effective, and has merely acknowledged that practices became more robust after the financial crisis.
  > Despite a number of enforcement actions that deal with misrepresentation in relation to due diligence,46 the SEC has not taken a rigid enforcement position on the effectiveness or ineffectiveness of due diligence industry practices.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811729-014](https://wulfkaal.github.io/claims/2811729-014) [failure/argued] *(failure mode)* -- The SEC's interpretation of Section 18 leaves a mutual fund subject to no statutory limitation or cap on its ability to borrow through the use of derivative instruments, provided the fund adheres to its asset segregation obligations.
  > In sum, the SEC's position has meant that a mutual fund is not subject to a statutory limitation or cap on its ability to borrow through the use of derivative instruments, if the fund adheres to its asset segregation obligations.
  Wulf A. Kaal, Unconstrained Mutual Funds and Retail Investor Protection (2016). SSRN: https://ssrn.com/abstract=2811729
- [2811729-036](https://wulfkaal.github.io/claims/2811729-036) [failure/argued] *(failure mode)* -- The Company Act's retail investor protection policies do not take sufficiently into account the investment strategy and risk attributes that unconstrained mutual funds share with private funds.
  > Company Act's retail investor protection policies do not take these risks sufficiently into account.
  Wulf A. Kaal, Unconstrained Mutual Funds and Retail Investor Protection (2016). SSRN: https://ssrn.com/abstract=2811729

**2017**

- [2834531-002](https://wulfkaal.github.io/claims/2834531-002) [mechanism/asserted] *(failure mode)* -- Because neither national nor international law recognizes artificial intelligence as a subject of law, AI has no legal personality and therefore cannot itself be held liable for the damages it causes.
  > Because national and international law do not currently recognize AI as a subject of law, AI has no legal personality and as such cannot be held personally liable for damages.
  Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Regulation Tomorrow What Happens When Technology Is Faster Than the Law (2017). SSRN: https://ssrn.com/abstract=2834531
- [3067615-030](https://wulfkaal.github.io/claims/3067615-030) [failure/argued] *(failure mode)* -- ICOs are not subject to predefined regulatory procedures: whitepapers do not follow prospectus disclosure guidelines, are not reviewed or audited by any authority, and are not subject to any form of rating of the new entrepreneurial initiative.
  > ICOs are not subject to predefined regulatory procedures. Whitepapers do not follow prospectus disclosure guidelines, are not reviewed or unaudited by any authorities and are not subject to any forms of rating of the new entrepreneurial initiatives.
  Wulf A. Kaal, Marco Dell'Erba, Initial Coin Offerings Emerging Practices, Risk Factors, and Red Flags (2017). SSRN: https://ssrn.com/abstract=3067615

**2019**

- [3411110-025](https://wulfkaal.github.io/claims/3411110-025) [failure/asserted] *(failure mode)* -- The SEC has developed neither blockchain-specific offering disclosure standards nor retail investor protection measures particular to blockchain based offerings, leaving issuers without guidance.
  > SEC has not identified or developed any blockchain-specific offering disclosure standards, or provided guidance, 2. SEC has not identified or developed any retail investor-protection measures unique / particular to blockchain- based offerings
  Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110
- [3411110-027](https://wulfkaal.github.io/claims/3411110-027) [failure/argued] *(failure mode)* -- Despite an early call for regulatory leadership from Commissioner Stein in 2015, the SEC has not addressed core recognition questions for blockchain in finance, including cryptocurrencies, tokens as securities, and DAOs as investment advisers.
  > Despite this early cautioning and call for action, the SEC has not yet addressed core issues pertaining to the recognition of blockchain technology applications in finance.
  Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110
- [3411110-036](https://wulfkaal.github.io/claims/3411110-036) [predictive/argued] *(failure mode)* -- Governmental endorsement and guidance on crypto investments is essential for future securities offerings involving cryptocurrencies and blockchain, and absent it the gap between the existing regulatory infrastructure and crypto securities investment will inevitably widen as the market grows.
  > As the market for crypto investments grows, the regulatory gap between the existing regulatory infrastructure and crypto securities investment will inevitably increase further.
  Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/regulatory-gap.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.